Which example illustrates subscription pricing?
A. For $10.99 a month, customers can stream any movie in Netflix’s catalog.
B. A customer can get a cheeseburger, french fries, and a soda for $1.50 cheaper than buying each of them individually.
C. All of the earrings in the accessory shop cost either $15, $20, $25, or $30.
D. The grocery store advertises special low prices on cereal to get customers into the store.
E. The price of the luxury car is purposely set high so as to suggest high quality and high status.
The correct answer and explanation is:
The correct answer is A. For $10.99 a month, customers can stream any movie in Netflix’s catalog.
Explanation:
Subscription pricing refers to a model where customers pay a recurring fee at regular intervals—typically monthly or annually—in exchange for access to a product or service. This pricing structure is common in industries like streaming, software, and fitness, where customers get continuous access to services or products over time.
In this example, the customer pays a set monthly fee of $10.99, which allows unlimited access to Netflix’s entire movie catalog. This aligns perfectly with subscription pricing because the customer is essentially “subscribing” to a service for a recurring fee, granting them ongoing access to content as long as the subscription remains active. The key characteristic of subscription pricing is that it offers continuous access as long as payments are made.
The other options represent different pricing strategies:
- B. A customer can get a cheeseburger, french fries, and a soda for $1.50 cheaper than buying each of them individually.
This example illustrates bundling, where separate items are sold together at a lower price. Bundling is a pricing strategy where products are grouped together, often to encourage a purchase of complementary goods. - C. All of the earrings in the accessory shop cost either $15, $20, $25, or $30.
This is an example of price listing or fixed pricing, where individual items have set prices. Customers can choose based on their preferences, but there is no recurring payment involved. - D. The grocery store advertises special low prices on cereal to get customers into the store.
This is an example of loss leader pricing, where a product is sold at a low price to attract customers into the store, hoping they will make additional purchases. - E. The price of the luxury car is purposely set high so as to suggest high quality and high status.
This is an example of premium pricing or prestige pricing, where the high price serves as a signal of luxury and quality, aiming to attract customers who want to signal high status.
Thus, option A is the only one that truly illustrates the subscription pricing model.